S&P upgrades US outlook to ‘stable,’ but investors yawn

AP, NEW YORK

Wed, Jun 12, 2013 - Page 15

The Standard & Poor’s (S&P) ratings agency said on Monday it was getting more optimistic about the US economy — but investors just yawned.

Stocks budged higher when trading opened, shortly after the S&P agency raised its outlook for the US government’s debt rating and credited “the strengths of the economy.”

FICKLE GAINS

However, the gains proved both modest and fickle, and the market spent most of the day flitting between small gains and losses.

The S&P’s statement harkened back to August 2011, when the agency slashed its rating of the US government’s debt because Congress was in a heated battle over whether to raise government spending limits.

The downgrade, an embarrassment to the US, also sent the stock market into a tailspin. The Dow Jones Industrial Average plunged 634 points, or more than 5 percent, on the first trading day after the downgrade. The market had triple-digit swings throughout that fall.

On Monday, the Dow closed down 9.53 points at 15,238.59, a loss of 0.06 percent. The S&P 500 index was essentially flat, falling 0.57 point to 1,642.81, or 0.03 percent. The NASDAQ composite edged up 4.55 points to 3,473.77, a gain of 0.1 percent.

S&P upgraded its outlook on the US debt rating to “stable” from “negative.” That does not restore the US government’s top-shelf credit rating, but it does mean that S&P is unlikely to cut the rating again in the near future.

LOW INTEREST RATES

S&P cited the US Federal Reserve’s willingness to keep interest rates low, which is meant to spur borrowing and spending, and its bond purchasing program, which is meant to encourage investors to buy stocks and other riskier assets.

S&P lauded Congress’ agreement to raise some taxes this year, notably the Social Security tax that most workers pay, which has helped shrink the government’s budget deficit.